Welcome to the Nexsen Pruet Weekly Legislative Update! The Nexsen Pruet Public Policy team provides attorneys and clients with a newsletter summarizing the week's activities and conveying the inner workings of the legislative process and state government in Raleigh.

Wrapping It Up?

A funny thing happened on the way to adjournment Saturday, they didn’t go home. The budget was the talk of the town in Raleigh last week and House and Senate budget writers spent the days leading up to its release, finalizing the details of the conference report. Tuesday, leadership held a press conference to outline the details of the budget and the document was released to the public Wednesday night.

Senators gave their approval to the budget conference report with second reading Thursday afternoon and third reading just after midnight Friday morning. House members passed the conference report on its second reading Friday morning and held third reading Saturday morning, sending the budget to the Governor. In the Senate, three Democrats voted with Republicans to pass the budget and in the House, four Republicans voted with Democrats against the budget. The Governor signed the budget into law this morning.

Much confusion remains over teacher salaries in the recent days since passing the budget with a new pay scale, longevity changes and a number of other issues. Many teachers do not know how much their salary will actually increase, although there is a budget provision to ensure no teacher is paid less this year than last year. Local school units are also scrambling to determine their budget adjustments.

An Adjournment Resolution generally follows the budget and outlines the parameters to adjourn the session sine die. The Adjournment Resolution from the Senate Rules committee Thursday morning calls for the legislature to adjourn August 2nd and reconvene August 14th. In the case of a veto, the legislature would return August 14th for an override session. There are now 16 bills waiting on the Governor’s desk.

The Senate Adjournment Resolution also calls for the legislature to adjourn again August 15th and reconvene November 17th, after the election, to address Medicaid reform and coal ash clean-up. This November date means that session would not adjourn sine die until after the election, with no firm date again.

The House however has other plans for adjournment. House leaders amended the Resolution to broaden what could be included on the August 14th session. They added to the list of legislation that may be considered, the major policy initiatives that passed both chambers in similar, but not identical versions that remain unresolved including:

Coal ash management

Omnibus environmental and natural resources laws

Confidentiality of unemployment compensation

Regulatory and administrative reforms which include:

Autism insurance coverage

Tanning bed age restrictions

Air quality measures

Storm water and wetland regulations

Technical and other changes to revenue laws which includes changes to:

The film tax credit

The historic preservation tax credit

Job Development Investments Grant program or JDIG

Job Maintenance and Capital Development Investment Fund or JMAC

The Senate adjourned the session Friday morning, expecting not to return until November. However, as an identical Adjournment Resolution has not passed both bodies, the House and the Senate will continue to return sporadically until they can reach an agreement on the terms of adjournment. The perennial appointments bill also remains unresolved. The bill would fill any vacancies for the several appointments to state boards and commissions that are reserved for the House Speaker and Senate Pro-Tem. Despite a plea from the Governor for the legislature to at least address some economic development issues in the near term, a spokeswoman for Sen. Berger (R-Rockingham) indicated that the Senate does not plan to return until November.

Also Last Week

The Senate gave final approval to its version of Medicaid Reform Monday evening and on Wednesday the House voted unanimously not to concur, sending the bill to a conference committee to be addressed later, perhaps August or November. Regulatory Reform also moved through the Senate chamber, with changes that the House did not accept, sending the bill to a conference committee where it has yet to receive action.

The Senate passed its version of the technical corrections bill which primarily removed a number of the non-technical provisions that the House had included in its version. The House initially voted not to concur but in light of the Senate’s departure, the House reconsidered and passed the Senate version in order to get a number of necessary, technical provisions enacted. The House also voted not to concur with the Senate local sales tax cap legislation. A conference report for that legislation emerged late Thursday night, passing the Senate that evening. The House originally had the conference report calendared for a vote, but referred the bill to the Rules committee Friday.

The conference report for Business Court Modernization S853 passed both chambers and was sent to the Governor. The bill would streamline the court that handles complex business litigation and would expedite the timetable for cases moving through it. It restructures corporate laws to model those of Delaware, facilitate the process for permitting holding company reorganizations and making them more flexible by ridding of the requirements of a shareholder vote. It also maintains that either cases where more than $5 million or the existence of a company is at stake, that those cases shall be heard by the business court.

Other legislation that now awaits action from the Governor includes H 366, the NC Farm Act of 2014 which shields farms from disclosing unfounded complaints against them and S648, the NC Commerce Protection Act of 2014 which contains a provision to curtail patent trolling as well as asbestos protections. The Governor also issued Executive Order 62 Friday to address coal ash management, since the coal ash legislation remains in limbo. He stressed that he does not intend for this to substitute for the necessary comprehensive legislation.

North Carolina Attorney General Roy Cooper (D-Nash) who is considering a run for Governor in 2016, said Monday after a ruling from the 4th U.S. Circuit Court of Appeals that North Carolina would no longer defend the gay marriage ban. Lawmakers passed legislation last year allowing the Speaker and President Pro-Tem to circumvent the AG and hire outside counsel to represent the state, but said there seems to be no intention to intervene at this point.

Two political figures resigned this week. Sen. Thom Goolsby (R-New Hanover) who had already announced he would not seek reelection resigned his seat effective immediately. Also, State Budget Director, Art Pope stepped down after overseeing two budgets under Governor McCrory. He stated when he first accepted the job that he would only serve for one year, but the Governor convinced him to stay on through this year’s budget. In a press conference Wednesday, the Governor announced that Pope will continue to serve until the first week of September and Lee Roberts of Raleigh will succeed him.

After an unusual floor appearance from Speaker Tillis (R-Mecklenburg) and an impassioned debate an attempt by Rep. Davis (R-New Hanover) to extend the film tax credit one more year passed 77-36. The measure now awaits concurrence in the Senate, where it was sent to the Rules committee.

Local Sales Tax

The Senate gave its approval Thursday to H1224 which would cap the sales tax that a local government may levy in North Carolina at 2.5%. Durham and Orange counties which already levy a local sales tax of 2.75% would be grandfathered. Four other counties, Forsyth, Guilford, Mecklenburg and Wake currently have the authority to raise their local sales tax from 2.5% to 2.75% but under the proposed bill, that authority would be taken away. A compromise amendment offered by Sen. Hartsell (R-Cabarrus) would have capped the rate at 2.75% statewide, but the amendment was defeated in a tie vote.

Counties below the proposed 2.5% would be allowed to raise their tax in quarter percent increments subject to voter referendum, and have greater flexibility. Senators did remove a provision that was in the bill last week that would have forced counties to choose between using an increase to fund either education or transportation but not both.

The bill was sent to the House which rejected the plan and appointed a conference committee. The conference report surfaced late Thursday night and would allow Wake, Guilford, Forsyth and Mecklenburg counties to be grandfathered in to the 2.75% local sales if approved by voters this November. The conference report passed the Senate, but was referred back to the House Rules committee where its fate remains in limbo.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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